SENIOR CONVERTIBLE
NOTE
$800,000.00
Houston,
Texas
August 21, 2008
FOR VALUE RECEIVED, the undersigned, REMOTE
KNOWLEDGE, INC., a Delaware corporation (“Borrower”),
hereby promises to pay to the order of SLW INTERNATIONAL, LLC, a
Texas limited liability company (“Lender”), at its
designated office, in lawful money of the United States of America,
the principal sum of EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($800,000.00), or such lesser amount as is advanced hereunder,
together with interest thereon at the rate set forth
below.
1. (a) All principal outstanding under this Note
(pursuant to the renewal, extension and conversion of the Prior
Note (as hereinafter defined)) shall bear interest retroactive to
the date of initial funding and prior to maturity at a rate equal
to the lesser of (i) the Maximum Rate and (ii) fifteen percent
(15%) per annum.
(b) If an Event of
Default has occurred all principal outstanding under this Note
shall bear interest at the lesser of (i) the Maximum Rate and (ii)
eighteen percent (18%) per annum.
2. Interest on the indebtedness evidenced by this
Note shall be computed on the basis of a year of 360 days and the
actual number of days elapsed (including the first day but
excluding the last day) unless such calculation would result in a
usurious rate in which case interest shall be calculated on the
basis of a year of 365 or 366 days, as the case may be.
3. Principal of and interest on this Note shall be
due and payable on the Maturity Date except as otherwise provided
herein.
4. Borrower shall pay to Lender a commitment fee
in the amount of $12,500.00 in connection with the funding of the
Prior Note which occurred on February 25, 2008. On the
date hereof, Borrower shall pay to Lender a commitment fee in the
amount of $75,000.00 for the increase of the Prior Note which
occurred on May 30, 2008, and the extension of the Maturity Date
and the conversion evidenced by this Note. Such
commitment fees shall be funded to Lender on behalf of Borrower out
of the proceeds of the advances hereunder and shall be fully earned
when paid.
5. Lender agrees to fund this Note to Borrower in
accordance with the express terms hereof in one or more
advances. Borrower may not reborrow any portion of this
Note which is repaid hereunder.
6. This Note is guaranteed as provided in the
Guaranty Agreements (hereinafter defined) and is secured by a first
priority pledge of any and all assets of Borrower, now owned or
hereafter acquired or developed, as provided in the Security
Agreement (hereinafter defined).
7. (a) At
any time and from time to time, Lender may elect, upon not less
than seventy-five (75) days notice to Borrower, at its sole
discretion, by written notice to Borrower, to convert or exchange
all or any part of the amounts outstanding under this Note and any
accrued and unpaid interest thereon into Borrower common stock
(“Conversion Interests”) as reflected
below. Each $0.04 of the outstanding balance of this
Note (the “Conversion Price”) may be converted into or
exchanged for one (1) share of Borrower common stock based on
62,500,000 outstanding shares of Borrower stock (the “Common
Stock”) on a fully diluted basis.
(b) The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided in order to
prevent the dilution of Lender’s right to acquire shares of
Borrower’s Common Stock hereunder. Upon each
adjustment of the Conversion Price, Lender shall thereafter be
entitled to acquire, at the Conversion Price resulting from such
adjustment, the number of shares of the Common Stock obtained by
multiplying the Conversion Price in effect immediately prior to
such adjustment by the number of shares of Common Stock purchasable
pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Conversion Price resulting from such
adjustment.
The Conversion Price shall be subject to
adjustment from time to time as follows:
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Stock Splits
and Combinations . If
Borrower effects a subdivision of the Common Stock, the Conversion
Price in effect immediately before such subdivision shall be
proportionately decreased. If Borrower shall at any time
or from time to time after the date hereof combine the Common Stock
into a smaller number of shares, the Conversion Price in effect
immediately before such combination shall be proportionately
increased.
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Common Stock
Dividends and Distributions . If Borrower makes a dividend or other
distribution payable in additional shares of Common Stock, in each
such event, the Conversion Price shall be decreased by multiplying
the Conversion Price then in effect by a fraction, the numerator of
which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance and the
denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such
issuance plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
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Capital
Reorganizations . If
there is a capital reorganization of the Common Stock, provision
shall be made so that Lender shall thereafter be entitled to
receive upon the exercise hereof the number of shares of Common
Stock deliverable upon exercise immediately prior to such event
would have been entitled as a result of such capital
reorganization.
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Other
Adjustment . In the event of any other event or
circumstance which results in any increase in or other change to
the issued and outstanding shares of the Common Stock of the
Borrower from and after the date hereof, including without
limitation, any public or private offering of securities of the
Borrower and any issuance of securities in connection with any
merger, acquisition, disposition or other similar transaction, such
that Lender’s right to acquire such shares of Common Stock
will be diluted as a percentage of Borrower’s outstanding
shares of Common Stock following such event or circumstance, the
Conversion Price shall be adjusted as necessary in order to prevent
any such dilution.
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Notwithstanding the foregoing, no adjustment in
the Conversion Price shall be made in connection with or as a
result of any dilutive issuance of common shares related to a
compensatory issuance of common shares to the employees or
directors of Borrower as approved by Borrower’s board of
directors.
All election notices, once given by the Lender,
shall be revocable until the date ten (10) days prior to the date
the election is effected. Borrower hereby agrees to take
all action and to execute, deliver and file such documents or
instruments, including, without limitation, amendments to
its charter and constituent documents, as may be required in order
to give effect to Lender’s conversion rights under this
paragraph.
(c) To the extent of Borrower’s delivery to
the Lender of the number of Conversion Interests into which the
amounts outstanding under this Note whether in whole or in part, is
convertible pursuant to the election made above (together with the
cash payment in lieu of any fractional share of Conversion
Interests as contemplated below), such delivery will be deemed to
satisfy Borrower’s obligation to pay the principal amount of
this Note and the accrued and unpaid interest
thereon. At Borrower’s option, all then accrued
and unpaid interest related to any such converted principal amount
shall be payable in cash by Borrower in lieu of any Conversion
Interests.
(d) No conversion shall result in the issuance of
fractional shares of Conversion Interests. If Lender
would otherwise be entitled to a fractional share, then Borrower
shall pay to the Lender an amount equal to the conversion value of
such fractional share unless the Lender has elected to maintain its
commitment under this Note.
(e) Upon any conversion of this Note into
Conversion Interests, Borrower shall, at its expense, deliver to
Lender as soon as practicable a certificate representing the number
of Conversion Interests to which Lender is entitled as provided in
paragraph (a) above at which time Lender shall surrender this Note
to Borrower if all the outstanding principal hereof and accrued
interest thereon is being converted or exchanged. In the
event Lender elects to convert or exchange less than all of the
outstanding principal of and accrued interest on this Note, the
unconverted portion of such principal and interest shall remain
outstanding and Borrower shall promptly issue a replacement
promissory note evidencing such outstanding amount in exchange for
this Note. Irrespective of the date of issuance and
delivery of any certificates with respect thereto, shares or units
of Conversion Interests purchased by conversion as provided herein
shall be, and deemed to be, issued to Lender as the record owner of
such shares as of the close of business on the date on which this
Note shall have been surrendered as aforesaid.
(f) Borrower, upon conversion of this Note,
covenants that all shares or units of Conversion Interests that may
be issued upon conversion of this Note will, upon issuance thereof,
be validly issued, fully paid and nonassessable and free from all
preemptive rights, taxes, liens and charges in respect of the issue
thereof. Issuance of certificates for Conversion
Interests upon the conversion provided herein shall be made without
charge to Lender for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by Borrower, and such
certificates shall be issued in the name of Lender.
(g) Lender acknowledges that this Note does not
entitle Lender, by virtue solely of this Note, to any voting rights
or other rights as a holder of any Conversion Interests of Borrower
prior to the conversion provided for herein.
(h) Borrower covenants that its issuance of this
Note shall constitute full authority to its officers who are
charged with the duty of executing certificates to execute and
issue the necessary certificates for shares or units of Conversion
Interests upon the conversion of this Note.
(i) Conversions are subject to a $100,000.00
minimum conversion amount (or such lesser amount as may be
outstanding under this Note).
8. As used in this Note, the following terms shall
have the respective meanings indicated below:
“Business Day” means any day on
which commercial banks are not authorized or required to close in
Houston, Texas.
“Cash Flow” means Cash Flow From
Operating Activities, as such term is defined by Statement of
Financial Accounting Standards No. 95.
“Event of Default” each of the
following shall constitute and be deemed an “Event of
Default”:
a) Borrower
shall fail to pay this Note or any installment of this Note
(whether principal or interest) when due.
b) Any
representation or warranty made or deemed made by Borrower or any
Guarantor or any of its respective officers in any certificate,
report, notice, or financial statement furnished at any time in
connection with this Note or any Loan Document shall be false,
misleading, or erroneous in any material respect when made or
deemed to have been made.
c) Borrower
or any Guarantor shall fail to perform, observe, or comply with any
covenant, agreement or term contained in this Note or any Loan
Document (other than as expressly provided in another clause of
this definition of “Event of Default”) and such failure
shall not have been remedied within ten (10) days after the earlier
to occur of (i) notice thereof from Lender or (ii) actual knowledge
thereof by Borrower or any Guarantor.
d) Borrower
or any Guarantor shall commence a voluntary proceeding seeking
liquidation, reorganization, or other relief with respect to itself
or its debts under any bankruptcy, insolvency, or other similar law
now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian, or other similar official of it or
a substantial part of its property or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it or shall make a general assignment for the benefit of
creditors or shall generally fail to pay its debts as they become
due or shall take any corporate action to authorize any of the
foregoing.
e) An
involuntary proceeding shall be commenced against Borrower or any
Guarantor seeking liquidation, reorganization, or other relief with
respect to it or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official for it or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed
for a period of thirty (30) days.
f) Borrower
or any Guarantor shall fail to pay when due any principal of or
interest on any debt for borrowed money (other than the obligations
hereunder), or the maturity of any such debt shall have been
accelerated, or any such debt shall have been required to be
prepaid prior to the stated maturity thereof, or any event shall
have occurred that permits (or, with the giving of notice or lapse
of time or both, would permit) any holder or holders of such debt
or any person acting on behalf of such holder or holders to
accelerate the maturity thereof or require any such
prepayment.
g) This
Note or any other Loan Document shall cease to be in full force and
effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower
or any Guarantor, or Borrower or any Guarantor shall deny that it
has any further liability or obligation hereunder prior to payment
in full of all obligations hereunder.
h) A
Material Adverse Effect shall have occurred.
i) The
occurrence of an Event of Default (as therein defined) under that
certain Credit Agreement dated as of even date herewith among
Borrower, Muragai, LLC, a Delaware limited liability company, as
the Lender Representative and as a lender, and the other lenders a
party thereto (collectively, the “Junior Lenders”), as
the same may be amended, modified, restated and/or supplemented
from time to time (the “Junior Credit
Agreement”).
“Guarantors” means Daniel Granader
and Randy S. Bayne, each an individual, and each such
Person’s heirs, executors, administrators, successors and
assigns.
“Guaranty Agreements” means each
Guaranty Agreement dated as of even date herewith, executed by the
respective Guarantors in favor of Lender, as the same may be
amended, supplemented or modified from time to time.
“Lien” means any lien, mortgage,
security interest, tax lien, financing statement, pledge, charge,
hypothecation, assignment, preference, priority or other
encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law or
otherwise.
“Loan Documents” means this Note,
the Guaranty Agreements, the Security Agreement and all security
agreements, deeds of trust, pledge agreements, assignments, letters
of credit, guaranties, certificates and other instruments,
documents, and agreements, if any, executed and delivered pursuant
to or in connection with this Note, as such instruments, documents,
and agreements may be amended, modified, renewed, extended, or
supplemented from time to time.
“Material Adverse Effect” means a
material adverse effect on (a) the business, operations, property
or condition (financial or o
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